Fed Statement, Conference Boost Stocks

By

Published April 27, 2011

| FOXBusiness

FOX Business: The Power to Prosper

The markets rallied for a second-straight day after the Federal Reserve said it plans on keeping short-term interest rates at extraordinarily low levels and Fed chief Ben Bernanke held the first-ever Fed press conference following the policy statement.

Today's Markets

The Dow Jones Industrial Average was up 95.6 points, or 0.76%, to 12,691, the S&P 500 gained 8.4 points, or 0.62%, to 1,356 and the Nasdaq Composite climbed 22.3 points, or 0.78%, to 2,870. The FOX 50 traded higher by 8.6 points to 952.

Large conglomerates like General Electric (GE) and Siemens (SI) advanced the most on the day.  Energy and materials issues like National-Oilwell Varco (NOV) Potash (POT) lagged behind. 

The Fed chief cautiously held close to the language the central bank generally uses in public statements, repeatedly noting the Fed's dual mandate to combat inflation and unemployment. 

“If we’re going to have success in creating a long-term sustainable recovery with job growth we’ve got to keep inflation under control," Bernanke said. 

The Fed said in its statement that it plans on keeping short-term interest rates between 0% and 0.25% for an extended period in a bid to keep the economic recovery on track.  Indeed, the central bank said it sees the economy recovering at a "moderate pace and overall conditions in the labor market are improving gradually."

"We are digging ourselves out of a very deep hole," Bernanke said. 

The central bank also said it expects inflation to remain "somewhat low," although energy and commodity prices have "pushed up inflation in recent months." However, the effects of energy-driven inflation are expected to be "transitory."

The Fed will also continue its controversial long-term treasury buying program with the goal of completing $600 billion in purchases in June as the markets expected.  

The program was originally enacted in November to directly push long-term interest rates down to spur lending, a major variance from the Fed's normal policy of utilizing short-term tools to spur or slow expansion. Some economists fear the accommodative monetary policy regime could create high levels of inflation, leading some to question when the Fed will begin tightening policy. 

Bernanke wouldn't give exact details on when the central bank would begin hiking interest rates, but said it could begin hiking rates after "a couple" meetings. The Federal Open Market Committee generally meets seven times a year. 

Also on the economic front, orders for long-lasting durable goods climbed 2.5% in March, according to the Commerce Department, edging out forecasts of a gain of 2%. However, durable goods orders excluding transportation were up 1.3%, missing calls for 1.8%. 

On the corporate front, Johnson and Johnson (JNJ) unveiled plans to acquire Swiss medical devices maker Synthes for roughly $21.6 billion in a bid to boost its orthopedic offerings. 

“Orthopaedics is a large and growing $37 billion global market and represents an important growth driver for Johnson & Johnson," said Bill Weldon, chairman and chief executive officer of Johnson & Johnson, in a release. 

Boeing (BA)  posted earnings of $586 million, or 78 cents a share, on revenue of $14.91 billion.  Analysts expected the airplane maker to earn 70 cents a share on $15.14 billion in revenue. 

DuPont (DD) plans on commencing a $2 billion share buyback program to offset dilution caused by issuing shares for executive compensation. 

In the foreign exchange market, the U.S. dollar fell to a 2011-low of 0.68 euros per dollar.  The euro gained 0.66% against the dollar, and the greenback fell 0.6% against a basket of world currencies. 

The dollar had actually eked out slight gains in late-morning trading but fell to session lows after Bernanke's news conference. 

Government bond rates gained on the day.  The yield on 10-year treasuries was up 0.059 percentage points to 3.37% and the yield on 30-years treasuries gained 0.069 percentage points to 4.46%. 

Energy prices gyrated as traders weighed mixed inventory reports with a falling dollar.  Domestic crude inventories jumped 6.2 million barrels to 363 million in the prior week -- a far greater build than the 800,000 analysts forecast.  

However, gasoline stocks were down 2.5 million barrels to 206 million, greater than the 1.1 million draw the markets expected. Decreasing gas stocks could put additional upward pressure on gasoline prices, especially as demand generally increases considerably during the summer driving season. 

Light, sweet crude gained 55 cents, or 0.49%, to $112.76 a barrel. Wholesale RBOB gasoline futures for May delivery jumped 6.2 cents, or 1.9%, to $3.42 a gallon -- the highest settle since July 2008.

Consumer gasoline prices keep edging higher.  A gallon of gas at the pump cost $3.88 on average nationwide, up from $3.58 last month and $2.86 last year. 

In metals, gold prices were up $13.70, or 0.91%, to a record high of $1,517 a troy ounce.

Corporate News

Berkshire Hathaway's board of directors said former top-executive David Sokol violated ethics rules when he purchased Lubrizol stock before suggesting Berkshire acquire the company without disclosing the purchase. 

Wal-Mart (WMT) is bringing back firearms sales to nearly half of its stores after it ceased selling them five years ago. 

Chrysler plans on announcing it has hired a group of banks to refinance its government loans, enabling the automaker to repay the $7.5 billion bailout from the United States and Canada, according to a report by The Wall Street Journal.

Apple (AAPL) fired back at critics who alleged popular iOS devices, such as the iPhone and iPad, are silently tracking location data and sending it back to Apple without permission. 

Sony (SNE) said its customers' credit card information may have been stolen following a breach that shut down its PlayStation network.  

Ericsson (ERIC) shares soared after the networking-equipment maker reporter stronger than expected revenue and profit on strong demand for wireless technology. 

Nokia (NOK) will slash 7,000 jobs and outsource its Symbian software business in a bid to reign-in costs. 

Whirlpool (WHR) released first-quarter results that blew away Wall Street’s expectations and backed its full-year guidance.

Foreign Markets

The English FTSE 100 was down 0.02% to 6,068, the French CAC 40 gained 0.55% to 4,068 and the German DAX climbed 0.66% to 7,405.

In Asia, the Japanese Nikkei 225 soared 1.4% to 9,691 and the Chinese Hang Seng was down 0.48% to 23,892. 

 

URL

http://www.foxbusiness.com/markets/2011/04/27/futures-point-modestly-higher-open/